Technical View | Nifty forms Doji kind of pattern, recent swing high possible only if index holds 17,800

Market

The Nifty50 finally settled with moderate gains after largely trading with around 50 points range on April 25, forming a Doji sort of candlestick pattern on the daily charts. The pattern indicates the tug of war between bulls and bears for further market trend, while the index has failed to hold on to the 17,800 mark on a closing basis.

The index opened higher at 17,762 and hit an intraday low of 17,717, but recouped losses towards the end of an initial hour and traded higher in the rest of the session. It closed 26 points higher at 17,769, continuing the uptrend and making higher highs and higher lows for the second consecutive session, which is a positive sign.

Hence, if the index sustains firmly above 17,800, then the Nifty50 can march towards the earlier swing high of 17,860 and 17,900-18,000 levels, where there is a possibility of some profit taking, whereas 17,500-17,600 remains crucial support levels, experts said.

“On daily charts, the Nifty has formed a small Doji candlestick formation which indicates indecisiveness between the bulls and bears. A minor intraday correction is possible, if the index slips below 17,720 and retest the level of 17,670-17,625,” Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.

On the flip side, a fresh uptrend wave is possible only after the dismissal of 17,820, and post-breakout the chances of the index hitting 17,900-17,925 would turn bright, he said.

Also read: Bullish on the Indian markets, Nifty may hit new highs in May: IIFL Finance’s Sanjiv Bhasin

The Option data indicated the Nifty50 may trade in the range of 17,500 to 18,000 levels in coming sessions. The maximum Call open interest was at 18,000 strike, followed by 17,800 strike, with Call writing at 17,800 strike, then 18,000 strike, whereas the maximum Put open interest was at 17,700 strike, which can be immediate support for the Nifty, followed by 17,600 strike, with Put writing at 17,800 strike, then 17,500 strike.

Bank Nifty

Bank Nifty opened on a positive note at 42,732 and gradually extended its momentum to hit a day's high of 42,866 in the first half of the session. However, it remained consolidative in a narrow range of 150 points between 42,650 to 42,800 levels in the latter part of the day. Finally, it closed with 43 points gains at 42,679 and formed small bodied bearish candlestick pattern on the daily charts.

The index started to form higher highs - higher lows from the past two sessions and supports are gradually shifting higher. Now it has to hold above 42,500 levels to make an up move towards 43,000, then 43,200 levels, whereas on the downside supports shifted higher to 42,250 then 42,000 levels, Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.

Rahul Ghose, Founder & CEO at Hedged feels a breakout in Bank Nifty above 43,200 level would also confirm an Inverse Head and Shoulder pattern which would have its first target at 44,000.

Also read: Earnings momentum unlikely to resume soon, says Harsha Upadhyaya of Kotak MF

“It is important to note that any healthy rally should have a consolidation before its next move up. This is exactly what Bank Nifty has done and can do before it starts its next move up.” Ghose said.

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